Low oil prices have forced ConocoPhillips to extend cuts to its capital expenditures (capex) budget through 2017, but that doesn’t mean an end to production growth, according to CEO Ryan Lance.

“We’re planning on lower, more volatile prices over the next three years. But we think we have a way to win in that environment. How do you do that? You do that through the portfolio,” Lance said during the company’s analyst and investor meeting in New York Wednesday morning. “The reason we were able to react as quickly as we did to the low commodity prices is because we believe we have a portfolio that’s flexible and resilient and really can win in a low-price environment.”

Last month, ConocoPhillips announced a three-year plan to reduce its annual capex budget from $16 billion to $11.5 billion, essentially extending previously announced cuts to its 2015 budget into 2017 (see Shale Daily, March 18; Jan. 29; Dec. 8, 2014). The company also said it planned to cut about 7% of its workforce in Canada, also as a result of low commodity prices.

ConocoPhillips expects spending on its development drilling program to increase while major project spending continues to decrease. Over the next three years, the company expects to make a $4-5 billion annual investment in the Lower 48, focusing on the Eagle Ford, Bakken and Permian basins, Lance said.

Things have been generally on the upswing for ConocoPhillips since it implemented a business model restructuring in North America following the spin-off of downstream operations in 2012, he said (see Daily GPI, April 17, 2012). “But we’re not resting on past performance. We’re looking at 2015 and we’re looking ahead to the future, and that world has changed, certainly.”

Natural gas and oil prices have fallen dramatically in recent months, “the forward curve has fallen, and there’s a lot of uncertainty out in time as to what the forecasts are going to be,” Lance said. “And that uncertainty is based on macro factors of supply and demand — what exactly is the supply and demand response going to be to the low, low prices we’re seeing today? How much deflation in the business is going to get captured? Is it sustainable? What sort of technology advances can we expect out of the business going forward over the next few years?”

The company’s plan is to grow its volumes even as it cuts capital spending, achieving 1.7 million boe/d by 2017, Lance said. Production from the Asia Pacific and Middle East, Canada and Lower 48 segments is expected to increase through 2017, while production from the Alaska and Europe segments is expected to remain relatively flat. ConocoPhillips expects a 2-3% volume increase this year.

When it comes to exploration, “we’re going to fund the existing commitments we have in the portfolio, but we’re limiting new access, and certainly new access that comes with either large up front capital commitments or large drilling commitments. On the major projects side, we’re delaying and deferring those that haven’t reached sanction, the ones where we have flexibility and we can do that on, yet we’re funding the things that are in execution in the portfolio today.

“On the development drilling side, we’re only focusing our investments on those lowest cost of supply opportunities, or those kinds of opportunities where we might be doing pilots to learn, because we see a lot of advantage and optionality and the chance to really optimize developments as we go forward and come out of this cycle.

“And then obviously we’re spending on our base. So the maintenance capital associated with keeping our legacy assets and ensuring the operating and asset integrity, we’re going to do that. And that’s how we get to $11.5 billion, and that stays flat between 2015 and 2017, but there’s a lot going on within that. We’re freeing up more flexibility in the portfolio as additional major projects roll off…and we’re allocating that capital to our development programs, where we know we have more flexibility, higher returns and shorter cash cycle time.”